Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

Hanger Beats, Raises EPS Guidance

Hanger Orthopedic Group Inc. reported second quarter 2012 adjusted earnings of 50 cents per share, beating the Zacks Consensus Estimate by a penny and exceeding the year-ago adjusted earnings of 45 cents a share.

Profit in the reported quarter was up 12.7% to $17.4 million (or 50 cents a share), driven by solid sales along with controlled expenses.

Revenues

Revenues rose 7.2% year over year to $251.8 million in the quarter, beating the Zacks Consensus Estimate of $249 million. This growth was led by higher sales across the company’s Distribution and Patient-Care Services divisions along with acquisitions (worth $5.9 million).

Patient-care services, Distribution and Therapeutic solutions segments represented 82.6%, 10.9% and 6.5% of total sales, respectively, in the second quarter. Sales from Hanger’s same center Patient-Care Services and Distribution segments grew 4.6% and 7.2%, respectively. Therapeutic sales increased by $0.3 million in the reported quarter.

Margins

Gross margin increased to 71% from 70.8% a year ago. Adjusted operating margin in the quarter was 14.2% versus 14% in the prior-year quarter.

Balance Sheet

Hanger ended second quarter 2012 with strong cash and cash equivalents of $41.6 million, more than twofolds higher than the year-ago quarter. Total debt was roughly flat year over year at $504.4 million.

Guidance

Hanger reiterated its revenue guidance for fiscal 2012 despite reimbursement and regulatory headwinds. The company expects revenues in the band of $970 million and $990 million. It foresees sales from its Patient Care Services and Distribution segments to grow 3% to 5% in 2012. Moreover, it expects flat to modestly higher sales in its Therapeutic Services division with higher sales from new contracts in the second half of 2012.

On the earnings front, Hanger has raised the lower end of its bottom-line guidance and now expects adjusted earnings per share in the range of $1.75 to $1.79 (earlier $1.72 to $1.79) for fiscal 2012. Adjusted earnings exclude one-time costs of 1 cent a share related to the deployment of the company’s new billing system and practice management. The current Zacks Consensus Estimates for revenues and earnings per share are $981 million and $1.77, respectively.

In addition, Hanger expects to generate operating cash flows of $70 million to $80 million in fiscal 2012 and aims to increase operating margins by 20–40 basis points in its core business and spend $40 to $50 million in capital expenditure. Further, Hanger aims to continue to pursue small tuck-in acquisitions which will roughly provide revenues of $20 million by year end.

Hanger leads in the orthotic and prosthetic (“O&P”) patient care services market, operating across more than 700 patient care centers in the U.S. The company’s economies of scale are unmatched by competition, which include notable players in the O&P space such as Orthofix International (OFIX - Free Report) , Conmed Corp. (CNMD - Free Report) and Exactech Inc. .

Hanger is poised to achieve meaningful cost synergies from its corporate relocation. However, we are cautious about the company’s exposure to reimbursement uncertainties and its aggressive acquisition strategy, which has inherent risks. We currently have a Neutral recommendation on the stock, which carries a short-term Zacks #2 Rank (Buy).

Resources

Client Support

Follow Us

Zacks Moblie App

Zacks Research is Reported On:

Yahoo

MSN

Marketwatch

Nasdaq

Forbes

Investors.com

Morningstar

Copyright 2018 Zacks Investment Research

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25% per year. These returns cover a period from 1988-2017. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zack Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

Visit performance for information about the performance numbers displayed above.